Which of the following is NOT a typical budgeting approach used by companies?

• A. Flexible budgeting
• B. Historical cost budgeting
• C. Incremental budgeting
• D. Zero-based budgeting

Answer: (B)

Verified step by step guidance

1. Understand the concept of budgeting approaches: Budgeting approaches are methods used by companies to plan and allocate resources effectively. Common approaches include flexible budgeting, incremental budgeting, and zero-based budgeting.
2. Define flexible budgeting: Flexible budgeting adjusts budgeted amounts based on actual activity levels or changes in business conditions. It is dynamic and adapts to fluctuations in operations.
3. Define incremental budgeting: Incremental budgeting involves using the previous period's budget as a base and making adjustments for the current period, such as adding or subtracting amounts based on expected changes.
4. Define zero-based budgeting: Zero-based budgeting starts from scratch, requiring all expenses to be justified for each new period, rather than basing the budget on historical figures.
5. Clarify historical cost budgeting: Historical cost budgeting is not a typical budgeting approach. It refers to using past costs as a basis for decision-making, but it is not recognized as a formal budgeting method like the others listed.